Verb(VERB) - 2019 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Verb Technology Company, Inc. reported a net loss of $3.0 million for Q1 2019, a significant improvement from $8.5 million in Q1 2018, primarily due to positive derivative liability changes and lower general and administrative expenses Condensed Consolidated Balance Sheets As of March 31, 2019, total assets decreased to $824,000, total liabilities increased to $7.9 million, and stockholders' deficit widened to $7.1 million, with cash significantly reduced to $59,000 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash | $59,000 | $634,000 | | Total current assets | $278,000 | $718,000 | | Total assets | $824,000 | $898,000 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $6,843,000 | $4,888,000 | | Total liabilities | $7,908,000 | $5,953,000 | | Total stockholders' deficit | $(7,084,000) | $(5,055,000) | Condensed Consolidated Statements of Operations For Q1 2019, the company reported a net loss of $3.0 million, a substantial improvement from $8.5 million in Q1 2018, driven by a positive swing in derivative liability fair value and reduced general and administrative expenses Quarterly Statement of Operations (Unaudited) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Sales | $9,000 | $8,000 | | Loss from operations | $(2,774,000) | $(5,392,000) | | Change in fair value of derivative liability | $944,000 | $(2,625,000) | | Net Loss | $(3,008,000) | $(8,494,000) | | Loss per share - basic and diluted | $(0.25) | $(1.00) | Condensed Consolidated Statements of Cash Flows In Q1 2019, cash used in operations increased to $1.1 million, financing activities provided $514,000, resulting in a net cash decrease of $575,000 and an ending cash balance of $59,000 Quarterly Cash Flow Summary (Unaudited) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,089,000) | $(993,000) | | Net cash provided by financing activities | $514,000 | $2,586,000 | | Net change in cash | $(575,000) | $1,593,000 | | Cash - end of period | $59,000 | $1,604,000 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business, accounting policies, and financial instruments, including a name change, reverse stock split, 'going concern' warning, and subsequent public offering and acquisition of Sound Concepts - Effective February 1, 2019, the company changed its name from nFüsz, Inc. to Verb Technology Company, Inc. and implemented a 1-for-15 reverse stock split[26][27] - The company's business is providing cloud-based SaaS products under the brand name 'Tagg', which use proprietary interactive video technology for CRM, healthcare (TaggMED), and education (TaggEDU)[28][29][31] - The financial statements were prepared on a 'going concern' basis, with substantial doubt about the company's ability to continue due to a net loss of $3.0 million and a stockholders' deficit of $7.1 million as of March 31, 2019[37] - In April 2019, the company completed a public offering raising net proceeds of approximately $18.94 million, which was used in part to acquire Sound Concepts, Inc.[38] - The company completed the acquisition of Sound Concepts on April 12, 2019, for $25 million, consisting of $15 million in cash and $10 million in restricted stock[112] Risk Factors This section is not applicable as the company is a smaller reporting company - Disclosure of risk factors is not applicable to smaller reporting companies[118] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant reduction in net loss for Q1 2019, primarily due to non-cash items, noting critical liquidity issues addressed by a subsequent public offering and the strategic acquisition of Sound Concepts, while also reporting ineffective disclosure controls Results of Operations Q1 2019 revenues remained flat at $9,000, while loss from operations decreased significantly due to reduced general and administrative expenses, though Modified EBITDA showed an increased loss reflecting higher cash operating expenses Comparison of Operations (Q1 2019 vs Q1 2018) | Metric | Q1 2019 | Q1 2018 | Change | | :--- | :--- | :--- | :--- | | Net sales | $9,000 | $8,000 | $1,000 | | Research and development expense | $564,000 | $130,000 | $434,000 | | General and administrative expense | $2,189,000 | $5,269,000 | $(3,080,000) | | Loss from operations | $2,774,000 | $5,392,000 | $(2,618,000) | - The decrease in G&A expenses was primarily due to a $3,759,000 reduction in stock-based compensation expense[134] Modified EBITDA Reconciliation (Non-GAAP) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net loss | $(3,008,000) | $(8,494,000) | | Total EBITDA adjustments | $1,089,000 | $7,717,000 | | Modified EBITDA | $(1,919,000) | $(777,000) | Liquidity and Capital Resources The company faced significant 'going concern' risk with only $59,000 cash at Q1 2019 end, but subsequently secured substantial liquidity from a public offering of approximately $20.5 million, used for the Sound Concepts acquisition, debt repayment, and working capital - As of March 31, 2019, the company had a cash balance of $59,000 and a stockholders' deficit of $7,084,000, raising substantial doubt about its ability to continue as a going concern[140][144] - Subsequent to the quarter, a public offering provided gross proceeds of approximately $20.5 million[145] - Proceeds from the offering were used to fund the $15 million cash payment for the Sound Concepts acquisition, repay $2.025 million in debt, and for working capital[145] Critical Accounting Policies Management identifies key accounting policies requiring significant estimates, including the valuation of derivative financial instruments using a Black-Scholes-Merton model and share-based payments using the Black-Scholes model - The company uses Level 3 inputs and a probability weighted average Black-Scholes-Merton pricing model to determine the fair value of its derivative liabilities[163] - Share-based compensation for stock options is valued using the Black-Scholes option pricing model, with key assumptions including expected volatility of over 200%[164][166] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable - Disclosure of quantitative and qualitative information about market risk is not applicable[169] Controls and Procedures As of March 31, 2019, management concluded that disclosure controls and procedures were not effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2019[171] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[172] PART II - OTHER INFORMATION Legal Proceedings The company is involved in two notable legal matters: a lawsuit with EMA Financial, LLC regarding a warrant exercise, and a claim from a former employee for unpaid bonuses and options, both of which the company is vigorously defending - The company is in a legal dispute with EMA Financial, LLC over the terms of a common stock purchase warrant exercise, believing EMA's allegations are without merit[91][173] - A former employee is seeking approximately $300,000 in alleged unpaid bonuses and options, which the company believes lack merit and are barred by a previous Stock Repurchase and Release Agreement[98][179] [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) During Q1 2019, the company issued unregistered equity securities including 39,998 shares for services, 16,667 shares as a convertible note inducement, and 148,714 shares from cashless warrant exercises - Issued 39,998 shares of Common Stock for services, valued at $388,000[182] - Issued 16,667 shares of Common Stock as an inducement for a $500,000 convertible note, valued at $128,000[183] - Issued 148,714 shares of Common Stock upon the cashless exercise of 161,969 warrants[184] Defaults Upon Senior Securities None reported - The company reported no defaults upon senior securities[185] Mine Safety Disclosures Not applicable - This item is not applicable to the company[186] Other Information None reported - The company reported no other information under this item[187] Exhibits This section lists all exhibits filed as part of the report, including articles of incorporation, merger agreements, various note and warrant agreements, employment contracts, and SEC certification filings